Fonterra Announces Earnings Pershare Forecast For 2016/17

Fonterra Co-operative Group
Limited has today announced a forecast earnings per share
range for the 2017 financial year of 50 to 60 cents. The
forecast Farmgate Milk Price has been maintained at $4.25
per kilogram of milksolids (kgMS), making the total payout
available to farmers in the 2016/17 season $4.75 to
$4.85.

Chairman John Wilson said the solid forecast
earnings per share range reflects performance improvements
across the business and would be welcomed by farmers.
However, with the Farmgate Milk Price forecast remaining at
$4.25 per kgMS, it is another financially challenging season
for farmers.

“The Co-operative is aware of how
tough the situation on farm remains. We are focused on
delivering as much cash as possible to our farmers by
bringing payments forward while maintaining a strong balance
sheet. This forecast is our best estimate at this early
stage of the season. We will continue to update our farmers
as we move through the season.”

Mr Wilson said the
$4.25 Farmgate Milk Price reflects the continuing global
uncertainty and the high NZD/USD exchange rate which
continues to impact the competiveness of New Zealand dairy
exports.

“The recent weakening of the Euro,
combined with the continued strength of the New Zealand
dollar, has meant a price advantage for European export
dairy products.”

“We expect global milk supply
and demand to come into balance over the course of this
season. Farmers globally are producing less milk in response
to lower prices and we are forecasting a three per cent
reduction in our New Zealand milk collection for this
season.”

Chief Executive Theo Spierings said the
returns from the ingredients, consumer and foodservice
businesses continue to grow in-line with Fonterra’s
business strategy to convert more milk into higher returning
products.

“We are seeing the benefits of our
investments in manufacturing over recent years. We now have
more flexibility to make the right products at the least
cost, delivering better returns for our farmers’ milk.

“Our good progress in continuing to increase value
through our consumer and foodservice businesses,
particularly in important markets such as China, Malaysia,
Indonesia, Sri Lanka, Oceania and Latin America, is
reflected in the lift in the earnings per share
forecast.

“Constantly improving the performance of
our business is an absolute priority and puts us in a strong
position to create more value for our farmers. We are
generating significant improvements and cash benefits
through our ongoing business transformation that contribute
to both our Farmgate Milk Price and our earnings,” said Mr
Spierings.

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